U.S., E.U. trade deal thorny

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This year marks the 20th anniversary of the North America Free Trade Agreement, which tore down barriers to trade and investment between the United States, Canada and Mexico.

Approved by the House, with the votes of 134 Republicans and 102 Democrats, and by the Senate, with the votes of 34 Republicans and 27 Democrats, NAFTA faced considerable opposition from labor unions and other protectionist interests.

But President Clinton, who took over NAFTA negotiations from his White House predecessor, George H.W. Bush, stood up to the protectionists, arguing that the trilateral trade pact would grow U.S. exports to Canada and Mexico, a benefit to American industries and their workers.

Clinton proved prescient.

U.S. businesses exported a record $292.4 billion in goods to Canada last year, according to the International Trade Administration, a bureau of the U.S. Commerce Department.

That was up 291 percent since NAFTA was ratified in 2003. Meanwhile, Yankee exporters sold a record $216.3 billion in goods to Mexico in 2012, up an astounding 520 percent under NAFTA.

ITA estimates that every billion dollars in exports supports some 5,000 jobs. That means NAFTA has created some 1.8 million American jobs since it took effect (with California, the nation's leading exporting state, claiming the lion's share).

The time has come for a free trade encore on the scale of NAFTA. It is just the kind of stimulus the underperforming Obama economy needs.

That brings me to the president. His views on free trade – particularly NAFTA, for which he previously held contempt – apparently have evolved. So much so that he has expressed support for a free trade agreement between the U.S. and the European Union.

The proposed Transatlantic Trade and Investment Partnership (TTIP) would be, as Joe Biden might say, “a big effen deal.” We're talking about the world's two biggest economies, with the 27-nation E.U. boasting a combined gross domestic product of $17.6 trillion and the U.S. a $15.7 trillion GDP.

Already, the U.S. and E.U. have agreed upon a framework for TTIP. If negotiations ultimately result in a trade pact, it will encompass half the world's economic output and a third of global trade.

E.U. tariffs on U.S. exports are already low, which is why annual trade between the two sides amounts to nearly $1 trillion.

The Economist magazine suggests that getting rid of remaining tariffs on American goods and services would increase U.S. GDP 1 percent. And eliminating just half of non-tariff trade barriers would boost GDP 3 percent on both sides.

The combined 4 percent would add more than $625 billion a year to this nation's economic output. And, again, using ITA's formula, that would generate some 3.1 million new trade-related jobs each year.

Given the tremendous economic benefits to be gained from the proposed TTIP on both sides of the pond, one might expect that the Obama administration and the EU would be rushing to get the trade deal done.

But, as the $34 billion U.S. floral industry can attest, no rose without a thorn.

Indeed, during the mid-2000s, the U.S. Trade Representatives office proposed to ratchet up tariffs on imported flower bulbs in response to alleged unfair trade practices by the E.U.

USTR thought that the imposition of tariffs would help protect domestic flower growers (most of which happen to concentrated here in sunny California), but, in fact, it did not. That's because more than 75 percent of bulbs used in the U.S. for cut flower production are imported from Europe.

So, by raising tariffs on imported bulbs, USTR would increase production cost for the typical grower by $300,000 to $600,000 a year.

That's but one example of the kind of thorny issues U.S. and E.U. negotiators will have to work through if they are to reach a comprehensive free trade agreement that not only garners the support of the floral industry on both sides of the Atlantic, but also such industries as farming, aerospace, consumer electronic, pharmaceutical, auto, motion pictures, winemaking, et al.

At least some U.S. and E.U. trade negotiators believe they can get TTIP done in the space of the next two years, which seems an extremely optimistic timetable. But even if it takes three or four years to win ratification in Washington and Brussels, it will be well worth the time and effort.

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